GST Ruling on Classification of Contracted Food Services by Assessee

The Hon'ble Authority for Advance Rulings Tamil Nadu in In re Jothi Catering Services [AAR No.113/AAR/2023 dated November 17, 2023] held that the food services provided by the assessee on a contractual basis to industries, which did not fall within specific GST categories like outdoor catering or restaurant services, were classified under other contract food services, consequently attracting an 18% GST rate.

Facts:

M/s Jothi Catering Services (“the Applicant”) engaged in the business of Outdoor Catering Services, filed an application seeking an advance ruling from the Authority for Advance Rulings, Tamil Nadu regarding the classification of their proposed service under the GST regime and the applicable rate as per Notification No.11/2017-CT(Rate) dated June 28, 2017 (“the Notification”) as amended by Notification No.20/2019-CT(Rate) dated September 30, 2019 (“the Amended Notification”).

The Applicant intended to enter into contractual agreements with large industries to supply prepared food and beverages to the workers employed by those industries. As per the template agreement furnished, they proposed to set up a kitchen/catering unit within the industrial premises or nearby to cook and supply food to the workers as per specified menu and quantity requirements. The food would be supplied and delivered to the client's premises by the Applicant, but they would not be involved in distribution/service within the premises. The client would provide infrastructure like kitchen space, dining area, utilities etc. while the Applicant would deploy staff, equipment and utensils. The Applicant planned to charge the clients based on the quantity of food supplied under the contractual agreements. 

Aggrieved by lack of clarity on whether their proposed contractual supply of food would be classified as Outdoor Catering Service covered under Explanation in the Amended Notification Restaurant Service or Other Contract Food Service under the Notification, and the consequent GST rate applicable, the Assessee approached the Authority seeking an advance ruling on the classification and GST rate.

Issue:

Whether the supply of food and beverages by the Assessee would be classified as Outdoor Catering Service, Restaurant Service, or Other Contract Food Services under the GST regime, and what would be the applicable GST rate?

Held:

The Hon'ble AAR Tamilnadu in AAR No.113/AAR/2023 held as under:

·       Observed that, the proposed activity of the Applicant to supply prepared food and beverages to the workers of industries under contractual agreements squarely falls within the definition of 'supply of service' as per Schedule II of the CGST Act, 2017.

·       Opined that, the Authority identified the appropriate tariff heading/service accounting code (SAC) for classification of the Applicant's proposed service as 996337 which covers "Other contract food services".

·       Noted that, The Authority observed that the Applicant's proposed service did not satisfy the definition of "Outdoor Catering Service" under the GST Rate Notifications as it was not an event-based or occasional service, but rather a continuous supply under a contractual arrangement. The Authority ruled that the Applicant's service could not be classified as a "Restaurant Service" either, as the Applicant did not have their own premises to serve food to the general public on payment.

·       Held that, the Authority held that the supply of food by the Applicant under contractual agreements with industries would be classified as "Other Contract Food Service" under SAC 996337, attracting 18% GST as per the relevant Notifications.